It's the new year. Are your finances feeling flabby and your resolutions already waning? You can make a difference to your fiscal future by following a new path.
Create a "to do" list with these simple steps to a new financial you.
Sort your KiwiSaver
If you're not in KiwiSaver, join. If you're not contributing, restart repayments. Even the $521 KiwiSaver tax credit over 25 years and the Government contribution of $521.43, in a growth fund after inflation, would amount to $20,129 by retirement.
If you're still in a default fund, review. Or if your circumstances have changed you might need to switch funds to something more suitable. You are the one who benefits from your KiwiSaver contributions.
Get a better deal
I wrote a series of articles in late 2017 looking at how to get better deals on mobile phone plans, electricity and gas, internet and more, which can be found at: NZHerald.co.nz/author/diana-clement
This can be a financially rewarding exercise. I always find savings, or at least more bang for my buck, when I do this. My best advice is to start with the premise that you're on the wrong plan and will get a better deal. This overcomes confirmation bias where you spend the time trying to justify your existing decisions.
Shop around for better bank accounts, credit cards, and mortgages.
As well as utility bills we can get better returns on all aspects of banking. Compare savings, credit and mortgage rates at Interest.co.nz or Pocketwise.co.nz. Sometimes changing the type of accounts you have from say ordinary term deposits to Pie savings, or a regular mortgage to revolving credit can make a huge difference.
A really important trick here is that you can make even more savings by operating your accounts differently. For example, banks such as Westpac allow you to automatically sweep money over a certain sum back and forth to interest-bearing accounts. Likewise, overpaying your mortgage to reduce the outstanding capital can save you more than simply switching for a lower rate.
If my car needs repairing I go to an expert with knowledge and experience to fix it. For tax I throw my books at an accountant. And if my body needs work I see a doctor, physio or other professional. There are experts in every corner of financial services who can help you plan and execute your financial life better. Authorised financial advisers often require that you have a certain amount of money to invest from which they will earn annual commissions.
A fee-based adviser, however, will charge you a one-off figure based on the time it takes to analyse your situation and make recommendations. Check out insurance and mortgage advisers as well.
Spring clean your head
The biggest mistakes we all make in our finances come from the clutter in our brains. We take mental shortcuts that seem to make sense, but sabotage our finances, such as spending windfalls instead of adding them to our budget. Work on rewiring your brain to handle money by becoming aware of the mistakes we make.
Don't fall for upgraditis
The NEED to upgrade your car, your phone, your TV, and every other item in your home is one of the most serious budget leaks there is. Even worse if you're doing it on tick. I fight the urge to upgrade my belongings even though I'm aware of the difference between needs and wants and how that confusion backfires financially.
Case in point was me on December 23 at The Warehouse, about to buy a new, wheeled chilly bin after the hinges of my existing one were broken off at a school fundraiser. I realised just in time that old faithful still did the same job of keeping things cool, and some designs don't even have hinges. Humans have very few real needs and almost everything we buy is a want, right down to most of the food in our supermarket trolleys. So instead of going shopping online or at the mall, use that time to enjoy the summer and cherish what you already own.
Don't throw it away
Whatever you do this year don't bet your financial future on the latest fad, which happens to be bitcoin right now, but can be anything from zero sum game forex trading platforms to whatever is hot in property investment. Every investment goes through ups and downs. But by the time most hit the headlines they're at the top of their cycles, which means the horse has bolted. Bide your time and invest after they've been through a down cycle and you understand the investment fully.
Happy New Year!